Twenty-two Chinese dairy firms will pay USD 160 million into a compensation fund for families of babies that died or fell ill after drinking tainted milk.Families of children killed by the tainted milk will each receive 200,000 yuan (USD 29,000) in compensation from the fund, the China Daily newspaper reported.
Parents of infants who were hospitalised will each get between 30,000 and 50,000 yuan, it said.
At least six babies in China died this year and another 294,000 fell ill after drinking milk laced with the industrial chemical melamine, which is normally used to make plastic.
Melamine was mixed into the watered-down milk to make it appear richer in protein.
But the chemical caused severe kidney problems and urinary tract problems in babies who drank the tainted milk powder.
The scandal, which emerged in September after initially being covered up, shook the foundations of a Chinese food industry that was already tainted by repeated safety problems.
It quickly became a global concern after contaminated Chinese milk products were found abroad.
According to the China Business News, the new fund will come into effect from January and pay for medical treatment and operations for diseases caused by the tainted milk.
In total, the firms will pay out more than 900 million yuan (USD 130 million) in cash and set up a 200-million-yuan medical fund to cover bills for any lingering health problems, the China Business News reported.
China Life, the country's largest life insurer, has been appointed to manage the fund, the report said, adding the government had ordered the firms to pay the compensation.